Breaking Down Company Formation Costs in Nepal

If you are a foreign company evaluating private vs public company in Nepal, the decision goes far beyond registration fees. It directly affects ownership control, compliance exposure, fundraising ability, and long-term exit flexibility.

Many foreign founders assume a public company is only for listed giants. Others believe a private company is always cheaper and easier. Both assumptions are incomplete.

This guide breaks down company formation costs in Nepal, explains the real operational differences between private and public companies, and helps foreign investors choose the structure that aligns with their risk profile and growth plan.

You will also see where most foreign companies overspend or mis-structure their Nepal entry.

Why Company Structure Matters for Foreign Companies in Nepal

Choosing the wrong structure creates hidden risks.

Your company type determines:

• Capital requirements and lock-in risk

• Compliance and disclosure burden

• Ease of foreign ownership and control

• Ability to raise capital or onboard shareholders

• Cost predictability over the first five years

For most foreign investors, this decision is made before engaging with the Office of the Company Registrar. Fixing it later is costly.

Understanding Company Types Under Nepal Law

Nepal’s Companies Act, 2006, recognizes two main corporate forms relevant to foreign investors:

• Private Limited Company

• Public Limited Company

Both are legal entities. Both can accept foreign investment under FITTA 2019. Their economics and obligations differ sharply.

What Is a Private Company in Nepal?

A private company in Nepal is designed for closely held ownership and operational control.

Key legal characteristics

• Maximum 101 shareholders

• Restriction on share transfer

• Cannot issue shares to the public

• Minimum paid-up capital often flexible, sector-dependent

This is the most common structure for foreign subsidiaries, joint ventures, and operating companies.

What Is a Public Company in Nepal?

A public company is designed for capital mobilization and wider ownership.

Key legal characteristics

• Minimum 7 shareholders

• No upper limit on shareholders

• Can issue shares to the public

• Higher minimum paid-up capital

• Mandatory enhanced disclosures

Public companies are not only for stock exchange listings. Many infrastructure and regulated businesses use this structure.

Private vs Public Company in Nepal: Cost Comparison

1. Incorporation Costs

Insight: Public companies cost more upfront even before operations begin.

2. Ongoing Compliance Costs

Public companies are structurally more expensive to maintain.

They require:

• More frequent statutory filings

• Enhanced financial disclosures

• Mandatory annual audits regardless of size

• Board and shareholder governance formalities

Private companies have lighter compliance, especially in early years.

Ownership and Control Considerations for Foreign Investors

Private Company Ownership

Private companies allow tight control.

Foreign parent companies can:

• Retain majority or full ownership

• Control board composition

• Restrict share transfers

This is ideal for subsidiaries, captive operations, and strategic control plays.

Public Company Ownership

Public companies dilute control faster.

• Share transfers are easier

• Governance is more regulated

• Minority shareholder rights are stronger

This structure suits capital-heavy projects, not control-sensitive operations.

Capital Requirements: The Hidden Cost Factor

Private Companies

Capital thresholds vary by sector.

Many service and tech businesses operate with modest paid-up capital, reducing idle funds trapped in Nepal.

Public Companies

Public companies face higher mandatory capital floors, even before revenue generation.

This capital is locked in and subject to repatriation controls.

Foreign companies often underestimate this cost.

Tax and Regulatory Treatment

From a tax rate perspective, both entities are treated similarly under the Income Tax Act, 2002.

However, exposure differs.

Practical differences

• Public companies attract closer regulatory scrutiny

• Compliance errors carry higher reputational risk

• Private companies allow more flexible internal structuring

Both must register with the Inland Revenue Department for PAN and tax filings.

Fundraising and Expansion Strategy

Your growth plan matters more than your starting budget.

When a private company works best

• Wholly owned foreign subsidiary

• Regional delivery or back-office center

• Technology, consulting, services, SaaS

• Controlled growth without public funding

When a public company makes sense

• Infrastructure or energy projects

• Banking, insurance, or regulated sectors

• Planned IPO or large domestic capital raise

• Multi-investor consortium structures

Foreign Investment Rules and FITTA Alignment

Under FITTA 2019, both structures can accept foreign investment.

However:

• Private companies face fewer approval complexities

• Public companies often trigger additional scrutiny

• Sectoral caps apply regardless of structure

Foreign investors typically gain faster approvals through private entities.

Compliance Risk Profile Comparison

Private Company Risks

• Lower disclosure burden

• Easier governance control

• Faster corrective action if issues arise

Public Company Risks

• Public filings expose internal data

• Higher penalties for non-compliance

• Slower decision cycles

Risk-sensitive foreign founders usually favor private companies.

Cost Summary: What Foreign Companies Actually Spend

First-year cost reality

Private company

• Lower registration fees

• Lean legal and compliance spend

• Capital efficiency

Public company

• High incorporation costs

• Mandatory audits and reporting

• Locked-in capital exposure

Over five years, public companies often cost 2–3× more to maintain.

Choosing the Right Structure: A Practical Checklist

Before deciding, ask:

1. Do you need public fundraising in Nepal?

2. Is control or capital more important?

3. Can you lock in higher paid-up capital?

4. Are you prepared for enhanced disclosure?

5. Is your sector regulated or capital-intensive?

If most answers favor control and efficiency, private wins.

Common Mistakes Foreign Companies Make

• Choosing public company status “just in case”

• Over-capitalizing early without revenue

• Ignoring long-term compliance costs

• Assuming structures are easy to convert later

Structure changes are possible, but expensive.

Final Verdict: Private vs. Public Company in Nepal

For most foreign companies, a private company in Nepal offers the best balance of cost control, governance flexibility, and regulatory predictability.

A public company is a strategic tool, not a default choice. It suits capital-heavy, regulated, or investor-driven projects.

Your structure should match your business reality, not hypothetical future plans.

If you align structure early, Nepal becomes a low-risk, high-efficiency market entry.

Frequently Asked Questions

Is a private company cheaper than a public company in Nepal?

Yes. Private companies have lower registration fees, lower capital requirements, and lighter compliance obligations, making them significantly cheaper to set up and maintain.

Can a foreigner own 100% of a private company in Nepal?

Yes. Subject to sectoral rules under FITTA 2019, foreigners can fully own a private company in Nepal.

Do public companies in Nepal have to be listed?

No. Public companies can remain unlisted, but they still carry higher compliance and disclosure obligations.

Can a private company be converted into a public company later?

Yes, but conversion involves regulatory approvals, capital restructuring, and additional costs.

Which structure is better for subsidiaries?

Private companies are generally better for foreign subsidiaries due to control, cost efficiency, and compliance simplicity.

Conclusion

When evaluating private vs public company in Nepal, foreign companies should focus on total cost of ownership, not just incorporation fees.

A private company is usually the smartest entry vehicle. A public company should be chosen only with clear capital or regulatory justification.

If you structure it right from day one, Nepal rewards you with stability, talent, and operational leverage.